How Much Money You Will Need to Close Your Escrow
So you get into escrow and you think you have enough money in the bank but then the fees start showing up and the Home Inspector wants his money now and the appraiser won't go out until the appraisal fee is paid up front and it can go on and on.
Here is a simple guide that shows what most of the fees are and what can be rolled into the loan vs. what you have to pay up front. You will get a detailed statement called a (GFE) Good Faith Estimate.
Lender Fees
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Loan origination fee. Fee charged by the lender to originate your mortgage, and is typically 1%-2% of the loan amount, depending on the lender you select and the loan program for which you qualify but if your FICO is high, sometimes this is 0 and the lender pays it instead.
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Application and underwriting fees. Fees charged by the lender to process your loan application and underwrite the loan. These fees are typically rolled into the total Loan origination fee.
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Appraisal fee. Fee charged by the lender to have your pending new home appraised to ensure the value of the home is equal to or exceeds the purchase price of the property and the loan amount you are requesting.
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Tax service fee. Fee charged by the lender to have an independent company ensure there are no delinquent taxes or outstanding tax liens against your property.
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Flood certification fee. Fee charged by the lender to ensure your new home is not located in a flood zone, and therefore there is no requirement for flood insurance.
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Credit report fee. Fee charged by the lender to ensure that you are credit worthy of being given a loan and that your financial liabilities do not exceed your financial assets.
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Interim interest. Mortgage payments always pay for interest in arrears. Interim interest is therefore charged by the lender from the date of settlement until the end of the month. For example, if you close on August 15th, you will pay interim interest from August 15th through August 31st, and your first mortgage payment will be due on October 1st. Your October 1st mortgage payment will therefore pay for all the interest accrued in September.
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Escrows. Whether your lender requires it or you choose to have an escrow account to pay your homeowner’s insurance and property taxes, you will be required to establish your account at the time of settlement. Depending on how close your settlement date is to the next due date for your property taxes, depends on the number of months that the lender will need to collect. However, the lender will need to collect at least 2 months for the buffer they keep in the account at all times.
Settlement/Title Company Fees
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Settlement fee. Fee charged by the title company to conduct your settlement. Under the new Real Estate Settlement Procedures Act (RESPA) guidelines, this fee now also includes the costs for any title search, courier fee, notary fees, etc.
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Owner’s Title Insurance fee. Cost of owner’s title insurance to protect you, as an owner, against title claims that could arise against the property. You typically have the option of selecting either the standard policy or enhanced policy.
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Lender’s Title Insurance fee. Cost of lender’s title insurance policy to protect the lender against title claims that could arise against the property. The cost is dependent upon the loan amount.
Government Fees
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Recording fees. Fees charged to record your deed and mortgage. Said fees vary depending on the jurisdiction in which the property is located. Recording fees are also charged to record any releases for any current/prior mortgages found against the property, to record any Powers of Attorney used by any party to the transaction at the time of settlement, etc.
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Transfer/ Recording. Fees charged by the state/local government to transfer title to the property.
Miscellaneous Fees
Fees that are paid to third parties for inspections. (Most of the time the seller pays these fees)
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Termite inspection. Fee paid to inspect the property for any termite or other bug damage.
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Condo/HOA Dues. If the property is in a condominium association or homeowner’s association, dues are typically required to be paid for the upcoming month. For example, if you purchase the property in August, the dues for September will typically be required to be collected at the time of settlement.
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Condo/HOA transfer fees. The condominium or homeowner’s association management company may charge a fee to transfer the property account from the seller to the new purchaser.
Prorations
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Tax prorations. Property taxes are prorated between buyer and seller depending on when the last tax bill was paid and when the next bill is due. Tax prorations are dependent on the jurisdiction in which the property is located, as each jurisdiction has different tax due dates and tax periods.
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Condo/HOA dues. Any condominium or homeowner’s association dues are prorated between buyer and seller based on the last month paid. For example, if you are settling on August 15th, and the seller has already paid the August dues, the buyer would reimburse the seller for the dues already paid from August 15th through the 31st for the time the buyer will own the property.
It is really quite simply when the fees are broken down and many fees are paid by the seller. So within 45 days, the escrow should be closed and all of this will be behind you. Happy Closings!
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Kristin Hamilton BRE #01492138 Keller Williams Realty –WCR Member– I am a full time agent and deal in all types of real estate transactions. Trusts, Probate, Short Sales, Standard Listing, Single Family Homes, Apartments 1-4 units, Duplexes and Condos. I am also an experienced REO agent. I sell real estate in the Riverside, San Bernardino, Orange, and Los Angeles Counties. I am a trained and experienced Short Sale agent. If you are looking for a professional and experienced agent, I am just a click away. Google me at Kristin Hamilton-Real Estate Agent. Homeowners and Buyers both will find my services top notch and successful. Call me to sell your home; both traditional and short sales.
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